(a) Approval by Local Government Commission. - The
Department may not award a loan under this Article unless the Local Government
Commission approves the award of the loan and the terms of the loan. The terms
of a loan awarded from the CWSRF and the DWSRF must be consistent with federal
law. In reviewing a proposed loan to a local government unit, the Local
Government Commission must consider the loan as if it were a bond proposal and
review the proposed loan in accordance with the factors set out in G.S. 159-52
for review of a proposed bond issue. The Local Government Commission must
review a proposed loan to a nonprofit water corporation and to an investor-owned
drinking water corporation in accordance with the factors set out in G.S. 159-153.

(b) Interest Rate and Maturity. - The interest rate
payable on and the maximum maturity of a loan are subject to the following
limitations:

(1) Interest rate. - The interest rate for a loan may
not exceed the lesser of four percent (4%) or one half the prevailing national
market rate for tax-exempt general obligation debt of similar maturities
derived from a published indicator. When recommended by the Department, the
Local Government Commission may set an interest rate for a loan for a targeted
interest rate project at a rate that is lower than the standard rate to achieve
the purpose of the target.

(2) Maturity. - The maximum maturity for a loan for a
project that is not a targeted interest rate project is 20 years or the
project's expected life, whichever is shorter. The maximum maturity for a loan
for a targeted interest rate project is 30 years or the project's expected
life, whichever is shorter.

(c) Security for Loan. - A local government unit may
pledge any of the following, alone or in combination, as security for an
obligation to repay the principal of and interest on a loan awarded under this
Article:

(1) User fee revenues derived from operation of the
wastewater system or public water system that benefits from the project for
which the loan is awarded.

(2) A mortgage, deed of trust, security interest, or similar
lien on part or all of the real and personal property comprising the wastewater
system or public water system that benefits from the project for which the loan
is awarded.

(3) Its full faith and credit if it meets the
requirements of Article 4 of Chapter 159 of the General Statutes.

(4) Nontax revenue not included in subdivision (1) of
this subsection.

(d) Debt Instrument. - A local government unit, a
nonprofit water corporation, and an investor-owned drinking water corporation
may execute a debt instrument payable to the State to evidence an obligation to
repay the principal of and interest on a loan awarded under this Article. The
Treasurer, with the assistance of the Local Government Commission, must develop
debt instruments for use by local government units, nonprofit water
corporations, and investor-owned drinking water corporations under this
section. The Local Government Commission must develop procedures for loan
recipients to deliver debt instruments to the State without public bidding. (2005-454, s. 3; 2011-145, s. 13.11A(c); 2015-207, s. 4(a);
2016-94, ss. 14.23(a), (b).)